Wednesday, February 24, 2016

Private equity firms will be able to snap up businesses cheaper in 2016 due to jitters over the health of the global economy, according to Carlyle Group 's co-founder David Rubenstein.

“You are going to see much more money invested [by private equity]
because lower multiples will be prevalent,” he said. “There’s a
recession every seven years and we haven’t gone more than nine years
without a recession. The last recession ended July 2009, so [in] June
2016 some people say something bad is coming along.”

Private equity firms have been complaining about high valuations for
businesses and how this has depressed private equity investment levels
for the past two years.

Rubenstein stayed away from predicting a recession but the more distressed an economic sector the greater chance for private equity underwriters to bottom fish. Carlyle's co-founders have a fresh $300 million between them to lure trophy firms.

Monday, February 22, 2016

The Carlyle Group will close Diversified Global Asset Management, its fund of hedge funds platform acquired in November 2013. DGAM had $6.7 billion in managed and advised assets when it joined the Carlyle family. It currently has less than $2 billion in assets under management.

DGAM's poor performance is similar to Carlyle's Claren Road hedge fund, which fell from $8.5 billion in 2014 to just over $1 billion, according to SeekingAlpha.

Between the two investment vehicles Carlyle saw AUM drop $12.2 billion. It would be interesting to see DGAM and Claren Road's actual performance as Carlyle affiliates.

Sunday, February 21, 2016

Data and analytics are buzz words in the C Suite. Many firms are hiring Chief Data Officers (CDO). That CDO is different than collatoralized debt obligations, but both have their root in complexity and mathematics.

He just invented the model. Instead, we should blame the bankers who
misinterpreted it. And even then, the real danger was created not
because any given trader adopted it but because every trader did. In
financial markets, everybody doing the same thing is the classic recipe
for a bubble and inevitable bust.

Correlations
are statistical associations which can change at any time. They are
not cause and effect. Consider the Super Bowl winner's impact on the stock market.

You may not know it, but the winner of this year’s Super Bowl will be a
pretty reliable predictor of how the stock market performs in 2016. This phenomenon has an amazing success rate: 82%. In fact, the winning
NFL team has tracked how the markets fared the last seven years in a
row, as well as for 40 of all 49 Super Bowl years.Robert H. Stovall, an analyst who’s popularized the predictor, admits it
has no grounding in fact. “There is no intellectual backing for this
sort of thing,” he said in an interview with the Journal, “except that it works.”

Corporate executives do many things with data, a number of which also have no intellectual backing. They optimize executive compensation to the detriment of the company and its employees.

1. What was the source of your data?2. How well do the sample data represent the population?3. Does your data distribution include outliers? How did they affect the results?
4. What assumptions are behind your analysis? Might certain conditions render your assumptions and your model invalid?5. Why did you decide on that particular analytical approach? What alternatives did you consider?6. How likely is it that the independent variables are actually
causing the changes in the dependent variable? Might other analyses
establish causality more clearly?

Knowledge of variation, analytical vs. enumerative statistics and subject matter expertise are also critical. It's important to know how numbers are generated/calculated. It's important to look at data over time with an eye on improving quality. And it's critical to remove threats, fear and intimidation so numbers can be honest and accurate. Most important leadership should be in relationship with the people they support.

That hasn't been the case for quite some time in America's hallowed halls of leadership. Management likes numbers that produce selfish
rewards. They prioritize additional debt and interest expenses over
employee raises and maintaining benefits. They spend on faster computer systems and complex
algorithms so they can deal with numbers, not real people.

Senior
executives hire consultants who know better than to return bad news. Thus, they craft questions and surveys that limit employees and
customers ability to give feedback because the C Suite really doesn't want to
hear what people think. Executives shoot the messenger when the rare brave soul penetrates the C
Suite's Castle walls with salient observations.

Analytics enable executives to avoid interacting with pesky customers or employees. Many senior managers will delight in replacing employees with algorithms and machine learning. UBS predicts the Fourth Industrial Revolution will benefit the richest. The more things change the more they stay the same.

Friday, February 19, 2016

The Carlyle Group closed on Veritas three weeks ago. Their press release stated:

Veritas CEO Bill Coleman said, “I am thrilled with the possibilities for
innovation and client service that we now have as a stand-alone
company. We will continue to be the go-to source for solving
organizations’ increasingly complex information management challenges.
The global Veritas team, with Carlyle’s support, is ready to perform for
our customers.”

He said the company would not be slashing jobs as a result of being
owned by private equity, and would be building for long-term growth and a
future IPO.

Rest assured Veritas is no stand alone. It has a greedy sponsor.

Update 2-22-18: Gone is Veritas big splashy meeting in Las Vegas. Carlyle replaced it with a series of regional confabs. Carlyle kicked upstairs the man that drove $800 million in value from Veritas prior to its PEU buyout. He's now a Carlyle operating executive.

Wednesday, February 17, 2016

A Carlyle Group press release announced the hiring of yet another insider with input into government strategy in the telecom, media and security arena:

Global alternative asset manager The Carlyle Group (NASDAQ: CG) today
announced that Renée James, former President of Intel Corporation, will
be engaged as an Operating Executive by the global Telecommunications,
Media and Technology (TMT) sector team. She begins her duties on
February 29th.

As an Operating Executive, Ms. James
will advise the Carlyle team on industry and operational due diligence
for potential investments and may serve on boards of Carlyle portfolio
companies in her area of expertise.

Ms. James will work out of Carlyle's Silicon Valley office. Their new hire serves on President Obama's National Security Telecommunications Advisory Committee. Luck for her the NSTAC's May meeting is in Silicon Valley and the November meeting will be in Washington, D.C., Carlyle's home base.

Sunday, February 14, 2016

Locals were less than pleased about the sight of some of the world’s
richest people lounging on Puerto Rico’s idyllic beaches plotting how to
get even richer by exploiting the island’s $72bn debt crisis – a crisis
that has pushed millions into poverty and brought the island’s schools
and hospitals to breaking point.

Hedge funds bought Puerto Rican debt at a discount, then pressed for repayment.

Billionaire New York hedge fund manager John Paulson invited hundreds of
financiers to swap the bitter chill engulfing Wall Street for the sunny
beaches of Puerto Rico for the weekend, if not for good.

At an investment conference held a short walk from the soft sands of
Condado, east of old San Juan, Paulson, most famous for making a $4bn
killing on the collapse of the sub-prime mortgage market, pitched Puerto
Rico as a new tax haven with “the potential to become the Singapore of
the Caribbean”.

Paulson, who is spending more than $1bn on luxury hotels and resorts
on the island, encouraged his fellow financiers to help him turn around
the island by moving there and, in doing so, saving themselves a small
fortune in tax.

More than 1,000 people, including private equity tycoons Nicholas Prouty
and Michael Tennenbaum, have already taken advantage of the island’s
“aggressive tax incentive” laws 20 and 22
that allow Americans to pay zero tax on US income if they spend at
least 183 nights on the island. They also get to keep their US
citizenship and passports, which they would have to surrender if they
moved to other tax havens like Singapore.

The greed and leverage boys manipulate dislocation to their perpetual advantage. Politicians are but a tool to be used. In this case eminent domain has been used to seize homes and demolish them in order to build a hotel and casino. It's the state of America and its territories, where politicians Red and Blue love PEU.

Hedge fund AUM declined to $8.3 billion as of the end of 2015, compared
to $13.4 billion as of the end of 2014 and we expect AUM runoff of
approximately $3.1 billion in 2016, which redeemed assets are sold and
returned to investors.

People want out of Carlyle's hedge funds. We'll see if they want in on CG stock.

Wednesday, February 10, 2016

1. With negative rates
2. People will need to rush to yield
3. Which can only be met by the greed and leverage PEU boys
4. Who soon will have investments for unaccredited investors.
5. Those same PEU boys sponsor our elected officials
6. And hire captured policy/regulatory high ups
7. After their "public service."

Tuesday, February 9, 2016

The Carlyle Group solidified its standing as one of the year’s busiest
deal makers this week with an agreement late Monday to sell the real
estate of its big nursing home operator, HCR ManorCare, to the real
estate investment firm HCP for about $6.1 billion.Under the terms of the deal, Carlyle will sell HCR ManorCare’s real
estate to HCP for $3.5 billion in cash and HCP stock worth $847 million
at Tuesday’s closing share price. Another $1.72 billion will come from
the reinvestment of HCP’s existing debt investments in HCR.

HCR, which will lease back the 338 properties while still operating
them, will wipe out nearly all of its debt. It will still be controlled
by Carlyle, though HCP will gain the right to buy a 9.9 stake in the
nursing home operator for $95 million.

HCP warned that HCR ManorCare continued
to face challenges, which it expects will continue into 2016. The REIT
noted that "reduced growth outlook for the broader post-acute/SNF
industry indicates challenges to the improvement in HCRMC's financial
performance over the next few years."

Its recently filed annual report discloses that the company generated 23% of its revenue from HCR ManorCare in 2015.

The company took an $817 million impairment charge in the fourth
quarter, reflecting its expectations for weaker performance. In addition
to industry-related challenges, HCR ManorCare is currently under
investigation by the Department of Justice, a quagmire that's costing
the company $1 million per month in defense costs.

HCR ManorCare has been a problem for HCP in the past, with the REIT having once already cut the rent it charges to the company.

Caution when striking a deal with a PEU. Like a viper they can turn on you.

As for Carlyle being a great operator one need only look at LifeCare Hospitals and ManorCare. Carlyle destroyed LifeCare's equity to the point of bankruptcy and ManorCare might be defunct without the REIT deal which nearly eliminated HCR Manorcare's debt in 2010.

ManorCare could be at risk if Carlyle bled the company via dividend recaps. That information won't be known until ManorCare goes public or bankrupt. We'll see which comes first.

Recall this is the model proposed to save healthcare. Surely it will put an end to us all.

Sunday, February 7, 2016

Carlyle Group co-founder David Rubenstein was not on the attendance list of the recent World Economic Forum meeting in Davos, Switzerland. The global elite gather annually in the Alps to strategize on how to maintain their hegemonic power and grow their massive fortunes.

Quartzreported Rubenstein as a no show, among a group of mostly former CEOs.:

David M. Rubenstein, the co-founder and co-CEO of publicly traded private equity firm The Carlyle Group, is another no-show. But Carlyle executive Volkert Doeksen is expected to attend.

Private equity has been front and center at the annual WEF meeting for decades. For 2016 Blackstone's Stephen Schwarzman served on a panel focused on "Future Proofing Financial Markets."

Private equity underwriters love Davos for two reasons. It's where deals get done and it can serve as a place for recruiting new investors. Apparently Rubenstein didn't need the World Economic Forum to sell new investment opportunities.

KKR & Co. founder Henry Kravis, Blackstone Group LP Chairman
Stephen Schwarzman and Carlyle Group co-founder David Rubenstein were
among the guests when Kazakhstan President Nursultan Nazarbayev hosted a
dinner in New York.

Apart from the dining at the Four Seasons
Hotel, there was access to a possible $93 billion on the table as
Nazarbayev, who presides over Central Asia’s biggest energy exporter,
seeks to boost returns on the country’s wealth funds. The $64 billion
National Fund has struggled to achieve an average of 2 percent annually
for the past five years.

The Carlyle
Equity Opportunity Fund II will focus on equity investments ranging from
$20 million to $200 million and serves as a follow-up to a previous
fund,

The new fund has already made investments in marine transportation
company Seacor Holdings Inc. (NYSE: CKH), merchandising solutions firm
Array Canada Inc. and in the McLean-based legal tech company LDiscovery
LLC.

What makes Rubenstein's absence more puzzling was his being in London on
January 18-19 for the London School of Economics Alternative Investment
Conference focused on hedge funds and private equity. Rubenstein and
fellow PEU David Bonderman of TPG served as keynote speakers for the event.

Last year Mr. Rubenstein was effusive about investing in oil. Carlyle's deal with Seacor came in November 2015, roughly two months before publicly announcing the new fund:

SEACOR Marine Holdings Inc. ("SMH"), entered into an agreement to issue
$175 million in convertible notes to investment funds managed and
controlled by The Carlyle Group ("Carlyle"). It is expected that the
notes will be issued on December 1, 2015. The transaction contemplates the eventual separation of SMH from SEACOR
Holdings' other business lines, potentially via a spin-off of SMH or via
a spin-off of SEACOR Holdings' other business lines.

Private equity and distressed debt specialist groups — including
Blackstone, Carlyle, Centerbridge Partners, KKR, Oaktree Capital
Management and WL Ross — have rushed to fill the void, by offering
rescue finance, buying up debt at a discount and turning it into equity,
or buying new and secondhand vessels. So far, their results have been
mixed, hindsight shows that some groups ventured into the sector too
early.

The first export of U.S. crude oil in four decades arrived in Europe early today, reaching the French port of Marseille before sunrise after leaving from Texas nearly three weeks ago, Financial Times reports.

Oil trader Vitol is expected to unload the shipment - a mix of ultralight oil from the Texas Eagle Ford shale formation produced by ConocoPhillips (NYSE:COP) - which will then travel by pipeline to one of two refineries the company operates in Europe under a joint venture with the Carlyle Group (NASDAQ:CG).

With such compelling topics what could have kept Carlyle consummate salesman away? Might it be investors fleeing Carlyle's hedge funds, Claren Road and Vermillion Asset Management? It's not a good time to ask for new money when existing investors can't get their money back.

Insider Architect of the Implosion

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